Global trade proved resilient in 2024 with 3.2% economic growth in the year’s second half, but momentum is now slowing amid weaker business confidence and persistent inflation. A key risk in 2025 is the growing fragmentation of global trade, driven by rising geopolitical tensions and policy uncertainty. Potential increases in tariffs—such as U.S. bilateral tariffs on non-commodity imports—could shrink global output by 0.3% over three years and raise inflation by 0.4 percentage points annually.
Maritime trade disruptions are also weighing heavily on global supply chains. The Red Sea conflict, particularly attacks by Yemen’s Houthi rebels, has forced vessels to reroute from the Suez Canal to the longer and costlier Cape of Good Hope. Although early 2025 saw a pause in attacks, Houthi aggression resumed by March, keeping security risks and insurance costs high. This rerouting has led to increased costs and delays, particularly affecting European-Asian trade in key sectors like construction, chemicals, and automotive.
Despite challenges, Southeast Asian economies continue to drive global trade growth, buoyed by strong exports in technology and electronics. China remains a dominant manufacturing hub, but its industrial slowdown and past U.S. tariffs are reshaping trade flows. High interest rates in major economies could also create currency pressures in developing markets.
To navigate 2025, businesses are shifting toward more diversified, resilient supply chains through nearshoring and friendshoring. Trade networks are expanding across multiple regions, including rising players like Vietnam and India. Global cooperation and balanced policymaking will be essential to avoid further fragmentation and unlock sustainable growth. While China’s stimulus efforts and easing inflation may help, protectionism and policy shifts in major economies remain key risks to watch.
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